Good luck IT industry, you will need it in the coming years. Against polls and predictions, including my own, the so-called Great British public has voted to leave the European Union.
The Brexit will not come into immediate effect, but its ramifications for the technology industry will be significant. Yesterday I wrote about the potential damage it could have on the UK’s blooming technology industry, written from a gut feeling that Britons would stick with the EU regardless of its inefficiencies. Better the devil we know.
But a little over half of the people who voted wanted out of the EU, and that is what will happen, probably around 2020.
However, the impact of the Brexit vote is already being felt. The value of the pound has fallen to its lowest since 1985, which will be felt by technology companies trading beyond the UK’s borders.
And those negative effects will continue as smaller companies in the UK’s technology sector are excluded from the opportunities created by the Digital Single Market.
Firms will also have to grapple with operating under the General Data Protection Regulation soon to come into effect across EU member states, while trying to come to terms with new legislation created by the Information Commissioner’s Office.
This will result in a lot of companies having to worry about where their data is being stored.
Ironically, one of the arguments set out by the Leave camp was a reduction in the red tape imposed on Britain’s businesses, yet being outside the EU’s data regulations is likely to introduce a mountain of rules that companies will need to negotiate.
Accessing people with digital skills from the continent will be tough as Britain will opt out of the EU’s freedom of movement rules. This means that the UK’s digital skills gap will widen as we wait for a generation brought up on code to mature.
IT firms that manage to overcome these challenges will then have to jump the hurdle of trading in Europe without the benefits of well-established trade agreements, thus making business as normal difficult.
In short, unless predictions are completely wrong and the government manages to negotiate lucrative trade contracts and a smooth transition from the EU, the UK’s technology industry and the major digital companies hosted in the capital will face some tough times.
Is there a sliver lining to the Brexit? I think it's very difficult to tell at this early stage, and certainly the current tangible disadvantages of leaving the EU outweigh the possible benefits.
Being unshackled from the EU’s trade regulations will allow major technology companies with the scope to operate on a globe scale to conduct more lucrative trade with the likes of China and the US.
If these companies find success in other major markets that could mean a fresh flood of revenue flowing into the UK’s digital sector, helping fuel its development and growth. It would be a gamble but one that may yield positive results.
Smaller companies have the chance to build their business models around trading outside EU regulations, possibly making them more agile in how they conduct trade and position themselves in different markets from the start, rather than being forced to pivot around well-established operations in the face of the Brexit.
Avoiding EU data regulations could have the flipside of enabling more flexible approaches to data location, effectively allowing cloud technology to behave more like the cloud than a host of remote data centres.
Yet this is all wild speculation. Undoubtedly, the challenges ahead for the UK’s technology sector are significant and pose an arguably unnecessary risk to its current success.
I only hope that members of the industry have steeled themselves for such an outcome and have strategies to cope that do not involve leaving the UK for mainland Europe.
Naturally, V3 will keep you abreast of how the Brexit plays out for the digital sector, but I wish those companies now coming to terms with the result the best of luck.
The water will be choppy but hopefully a steady head on the tiller will see you and the industry through the journey out of Europe.
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